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The UK is to probe Abu Dhabi-backed RedBird IMI’s offer to take over the Telegraph Media Group, a decision fuelling further uncertainty over the ownership of the right-leaning national newspaper in the run-up to the next general election.
Culture secretary Lucy Frazer said on Thursday that the transfer of ownership of the shares to RedBird IMI would be scrutinised using a Public Interest Intervention Notice to start an investigation by Ofcom, the media regulator, and by the Competition and Markets Authority.
She said her decision was based on the need for “accurate presentation of news and free expression of opinion in newspapers”, with both the CMA and Ofcom asked to report back by January 26 2024.
The decision is throwing uncertainty into a complex process to determine who will succeed the Barclay family as owners of the Telegraph and sister publication the Spectator, which were put into receivership by Lloyds Banking Group last summer.
But the decision is not a complete setback for RedBird IMI. The US-based investment company had feared a wider probe into the first part of its proposed deal, whereby the Barclay family would pay back their Lloyds loans with debt funding from Redbird IMI.
This would enable the family to temporarily take back control of the Telegraph group. RedBird IMI then intends to convert the debt provided to the family into full equity ownership of the group.
Frazer’s decision follows concerns from Conservative MPs over risks to press freedom in the UK from a deal to sell to an investment fund that has the majority of its funding from Abu Dhabi. RedBird IMI is 75 per cent owned by Sheikh Mansour bin Zayed al-Nahyan’s International Media Investments but run by former CNN boss Jeff Zucker.
RedBird IMI has promised to preserve the titles’ editorial independence with a separate supervisory board. The existing independent directors appointed by Lloyds, led by Openreach boss Mike McTighe, will be retained to oversee the newspaper during the investigation, as well as to unwind the deal should the regulator rule against the debt to equity deal.
The bidder has also insisted that its Middle Eastern backers play no role in the management of its assets.
In an interview, Zucker criticised rival newspapers launching sustained “mud slinging” after the details of his bid emerged, including those that also want to buy the titles.
If the debt repayment proceeds as planned, Lloyds will recover the full £1.1bn in debt owed by the Barclays, which it has written down in its books.
RedBird IMI is planning to use £600mn of this loan for the purchase of the Telegraph Newspaper Group. Lloyds has already called for the funds to repay the loan, according to people close to the process. Final documents still need to be signed ahead of the weekend, with payment expected on Monday, they said.
The remaining debt to Lloyds will be repaid by IMI directly and then swapped into a corresponding loan to the Very Group, the financial services and retail group owned by the Barclay family.
The RedBird IMI offer has short-circuited an auction process to sell the titles, expected to have yielded about £600mn in total.
The decision by ministers not to intervene to stop the repayment of the debt will be a blow to rival bidders, who had called on the government to scrutinise the entire deal.
Other contenders include hedge fund billionaire Sir Paul Marshall; DMGT, the owner of the Daily Mail; and News Corp, owner of The Times. They are expected to testify against RedBird IMI during the investigation in the hope that the deal will be blocked.